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Automotive Companies: Driving Toward Growth

Digital has put automotive companies on a new course. Customers today want to buy cars online, and they want connected vehicles equipped with personalized options.

Overview

Automotive companies acknowledge the benefits of reducing costs, focusing on value and reinvesting cost savings into growth, but fewer than 1/3 are positioned to fully optimize and deliver those outcomes.

To respond, dealers must figure out how to use the customer data they have to improve online sales and digital interactions. Car manufacturers must produce vehicles faster, and according to customer preferences. But how?

To meet the escalating demands of the digital age, automotive companies must revitalize sales and operating models and unlock savings that can be reinvested in digitally enabled programs that will fuel growth and agility.

Building a leaner machine

Although margins are already low, automotive companies continue to explore ways to operate more leanly.

There is strong agreement that technology and advanced operating models are enablers for both cost reduction and growth:

Technology

Advanced
operating models

What’s fueling cost management activities?

The top outcomes driving cost management activities are:

Simplifying and increasing the flexibility to respond to market changes

Improving
competitive advantage

What’s hindering cost management activities?

The top barriers that are most commonly cited while implementing and sustaining cost management efforts are:

Balancing
supply and price

Balance of internal vs.
external costs

Automotive industry analysts believe that further cost savings can be made through changes in production methodology.

They suggest:

Greater platform-sharing within and between manufacturers

Moving production close to raw material locations or to lower cost countries

Accelerating in the digital age

Automotive business and operating models must shift to support greater agility. For instance, OEMs need the flexibility to work across the entire value chain to deliver value-add, personalized experiences, now that the likes of Google and Uber are stepping into their territory. Digital enables speed to market and new business models that fuel innovation.

Who’s ready?

Executives do see some obstacles in the way of advancing operating models: Cost of effort, technology and change management(38%) are the most common barriers.

30% of automotive businesses surveyed are already or very willing to leverage new business models that may initiate and drive value out of new capabilities.

A win-win: An advanced operating model can enable digital capabilities and cost reductions, and digital capabilities can help reduce costs and contribute to growth.

Putting savings into growth

To fuel growth, automotive companies are focusing on digitally enabled services that support the customer journey. For instance, dealers are pursuing ways to sells cars as connected, IOT-enabled devices. Even the sales process has become digital, using hologram technologies to help shoppers customize their dream vehicle, or using handhelds to show custom features on the fly.

Top areas for reinvesting cost savings

Digital
technologies

Enhancing customer or
consumer experience

Expanding into
new geographies

Make inroads to profitable growth

Rethink your operating model

Pursuing advanced operating models that are digitally enabled will allow automotive companies to increase their efficiency and agility. Operating more leanly frees up costs that can be reinvested to fuel growth initiatives and drive competitiveness.

Explore new business models powered by digital

New business models and digital capabilities allow for more aggressive growth. For instance, automotive companies can move beyond being a manufacturer of vehicles, to become part of a broader ecosystem that delivers services and customer experiences. Connecting with the ecosystem opens up new opportunities for companies to decide whether they want to build their own capabilities, or partner with others who can supplement the business’ core offerings.

Put the right talent in the
driver’s seat

Digital has raised the stakes for processes across the automotive value chain. Now, dealerships, OEMs and parts manufacturers need digital-savvy people who can support the transition to digital enterprises, and at the same time, use digital to improve the customer experience. Automotive leaders must reconsider the talent required to operate in the future and ensure they have the right skills on board.

About the research

Accenture conducted quantitative and qualitative research across 700 executives in 13 industries and nine geographies to analyze the challenges and opportunities associated with creating cost-competitive operating models and reinvesting in growth. In parallel, Accenture interviewed 65 industry analysts across these industries to understand what external stakeholders measure, value and expect from the companies they cover.

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